A background in geology made one thing certain for Christine Lloyd: Nature isn’t made of straight lines. Neither are people, the prima materia of organizations.
“I often use water as a metaphor in systems work,” she says. “When I get stuck on an organizational problem, I always think back to ‘what would the flow of water do here?’”
Those may sound like words uttered by a philosopher, but they’re grounded in science. The theoretical foundation of Chris’ work is complex adaptive systems, using whole systems thinking to help steer organizations and their leaders through periods of complex and unpredictable change.
Chris’ work has taken her around the world and through diverse industries. She has served as a senior executive in blue chip organizations such as Shell, ICI, Nokia, Cancer Research UK and UNICEF.
What wisdom can be gained from 20 years of applying systems science to massive organizational transformations? As our world becomes more complex, our organizations (like anything in nature) must also complexify in order to meet the demands of their environment. Drawing from her pioneering work with Nokia and UNICEF, Chris shared with d4e how she created innovative network structures to make change and innovation easier in a VUCA world — before anyone knew what VUCA was.
Here were our takeaways from the interview:
You can’t treat everything as a closed, predictable system.
The story of my career has been one of looking at organizations as closed systems to looking at them as more open ecosystems with all the feedback loops and networked mechanisms that complex systems entail.
Early on, I moved into an area of work which in the UK was called operational research. It was very much input-process-output. It was quite project management based with a mechanistic approach. You were expected to reduce almost everything to a scientific equation, and yet the more you tried to implement those equations, the more you realized there’s this thing called human behavior that actually got in the way of what was supposed to be very predictable. My first few years in business taught me that viewing organizations as closed, predictable systems doesn’t really work.
Create the conditions for the system to design itself
More recently I began thinking of organizations as very emergent, viral systems where you can set things in motion, but you can’t really predict the outcomes. A lot of my work recently in the last five or 10 years has been about creating conditions for aspects of the system to design itself based on collaboration, dialogue, and relationships.
I would’ve said one of my approaches is organizational design, but someone once said to me, you cannot design organizations. And I think that’s a really interesting concept to explore. Going back to the water analogy — you can’t design a false channel for water. Over time, the water will try to get back into its natural flow and course. I think the same is true to a large extent in organizational design. Trying to impose conventional designs onto this amoebic-type complex system of human relationships is just a contradiction.
Working with an organization from a complex systems perspective, you’re ultimately designing the conditions, not the structures, for innovation to emerge.
My personal style is one of working with inclusive, collaborative and networked approaches. You want to ensure that organizations have the strategy, design, people and culture for success in an unpredictable world — whilst embedding appropriate values, ethics and behaviors.
Work with the organization as a social organism
Through my career, the systems I worked with were increasingly unpredictable. That said, my approach is much more about identifying the right questions to ask. With a current client, we start with “What do you want this organization to be able to do?” And then we get a list of requirements in terms of customers, stakeholders and partners, employees, using that as a starting point to start to design an inverted commerce, taking into account the nature of the relationships between all those parties.
That’s why it’s helpful to think of organizations as a set of social relationships. I have gotten a number of clients to that place. We often start out with leadership saying, “We need to design the structure of this organization,” and then work with them toward a stakeholder analysis by asking, “Who are all the various parties that you’re interacting with?”
Through that process, they start to see the organization more as a map and a set of relationships, and they accept that those relationships will change as the context changes, becoming more dynamic.
Identify a C-level advocate for experimentation, get permission to disturb systems
I worked in an isolated part of Shell, the research and technology division, and we were given permission to experiment with pushing organizational boundaries. In applied network science, you have this whole notion of getting rid of the complicated processes and procedures and defining simple rules. And we were able to do that. The key is, you need somebody at the top or very near the top — and it only has to be one person — who’s up for taking the risk.
Which can be scary, because many times you’re talking to people at the top of the organizations who have gotten to where they are today by repeating patterns and being predictable. When you try and work in the world of emergence and unpredictability with a group of people who have largely succeeded because of predictability, that’s a very interesting dynamic.
But if you find your advocate, you want to work with them to get some small, quick wins. This is not the traditional top-down structures approach to change. Instead you create innovation centers, experimentation, and fast prototyping of initiatives where you can test the effects of your simple rules on a local network.
During my time at Nokia, the chief executive was quite skeptical and very structured. But the president (the #2) was head of business development and was up for a new approach. We defined this as introducing a venturing approach to business development. So we created a whole ring-fenced organization which was a sort of subset of mainstream Nokia culture. I think that’s another way of proving the case without all the evidence and the data — getting permission to create almost a rebel organization. We actually tore up the rulebook and were given a remit to go out and disturb systems. That’s always been a theme: Wherever the system’s work has been most successful, it’s always been about having permission to disturb systems.
Create a ‘venturing organization’
At CDC and UNICEF, a key focus was developing entrepreneurial approaches whilst working within the required risk and governance frameworks. This involved creating a mindset of ‘freedom within frameworks’ by defining the critical boundaries and space for creativity within them. Creating a safe space for chaotic conditions is absolutely critical. I’m working with a large organization within the UK now, and we’re creating something we call a ‘hothouse’ environment, because systems today are just too complicated for the old fashioned top-down approach to change. With this ring-fencing strategy, you gain permission to create different cultures that don’t have to conform to the mainstream organizational culture. But you still want to have enough linkages to the mainstream organization that there is some affinity. So you’ve got the skeleton of culture there, but in this smaller area you’re given permission to create a much more innovative, entrepreneurial environment.
While I was working in Nokia I went to live in Finland for five years. I arrived in Finland and they’d started to set up this new venturing organization just before I arrived. I sat down with the head of the organization and he was explaining how people got selected to be in this subsystem. And it started out almost being the people that mainstream Nokia didn’t want, like the poor performers. I suppose that was either lack of acceptance, or certainly a lack of understanding. It was almost like, “Oh, this has no chance. Let’s park the people we don’t want over there.” And yet, one of the really strong lessons for Nokia was that in that freer environment, these ‘outcasts’ really thrived. Over time, there was real learning about how people’s potential flourished when you didn’t have some of the constraints and structures of the main organization.
Initially the venturing org it was seen as not the place to be in Nokia, but by the end of the third or fourth year, we had people lining up to participate because of the way it was working.
Within the Nokia venturing organization we set up a leadership development program called Choices. At the time I was based in Palo Alto and I was working with people like Kathy Eisenhardt, and an up-and-coming professor, Rita Gunter-McGrath. With Rita we designed this Choices program based on discovery driven strategy. The program was very different and much less structured than the mainstream organization, and it was completely designed and self-managed by the participants. It was all a bit wacky to begin with, but again, after about three years, we had a huge waiting list of participants lining up just from word of mouth.
Design a percolation strategy
This is almost like an exit strategy, except what you’re doing is designing ways to get connectivity from the subsystem back into the main system. That way the culture and values of the venturing organization spread organically throughout the larger organization. It’s a bit like an exit strategy I suppose. Right at the beginning, you work out how you’re going to transplant some of this new culture you’re creating back into the mainstream organization.
At Nokia we did things like rotating senior managers in and out of the ring-fenced org. We linked it with leadership development initiatives, so that potential managers in mainstream Nokia came to think of it as a great place to do two years on rotation into the main organization. The goal was to create more connectivity and reinforcing feedback loops between the venturing organization and the main organization.
What was different about Nokia was that this effort was all very deliberate. We designed it with a systems approach of accepting that this organization was a complex system with subsystems. Knowing that we wanted to increase the connectivity between the subsystems, we considered how we would design reinforcing feedback loops. We designed with a very focused complexity approach, considering the simple rules we would begin with. We asked questions like, Where do we disturb the system? How could we get amplification of the disturbances to maximize impact?
I think the secret is not having to fight to bring people on board; it’s more about sewing the seeds and waiting for people to look over the fence and be inquisitive.
A Complex Systems Approach to Change
1. Redefine the org as a set of social relationships
2. Focus less on concrete answers, and more on asking the right questions
3. Let values and purpose define your parameters
4. Find a C-level champion
5. Create a safe space, innovation center or venturing organization
6. Draw new boundaries, redefine success measures
7. Design a percolation strategy
8. Combine top-down and bottom-up measures to scale adoption
Define new boundaries and success metrics
Values and principles are the absolute glue for an organization. One of my clients at the moment started off by just defining values and principles, and now as we’re going into designing more process and defining objectives, all the time we’re going back to the values and principles. What would those principles say about this objective, this relationship, or this outcome?
What I’m seeing is the boundaries of organizations becoming much more porous. At the moment I’m engaged with a big foundation in the UK which gives grants to local communities. Because of where the work is taking us, you actually can’t tell where the organization ends and the stakeholders, clients and beneficiaries begin. They’re actually redesigning the formal structure of the org (which is very centralized at the moment) to integrate the communities they serve. They’re disbanding their formal structures and placing their employees within those community groups. They used to have big head offices. Their employees now sit in the local community groups that are receiving the grants.
You’re breaking a big heavy central system almost into holons. Every community that is funded or wants to be funded by this foundation now has a member, an employee of the foundation, embedded in that community almost as a servant to the community.
It’s exciting to think about how this will change traditional business models, because the organization’s boundaries become invisible. If you sat in a community meeting, you wouldn’t know who was employed by what organization. And new systems emerge that have completely different properties, and different DNA. Almost like osmosis, or on another level, metamorphosis. They are transforming into new separate identities, not just mini versions of the macro organization, as they go into this new, much more fluid org design.
If you want to get scale and speed, combine bottom-up and top-down measures
I think of an example where a new CEO came in and did do some top-down change, but actually the most important and effective thing was to get the whole organization to design new values and principles. So the glue was something that was done right across the organization. That got rid of a whole layer — a regional layer — of structure. Structurally it went from center straight down to local without any regional hubs. But that was enough to disturb the system from a top-down perspective. After that, scaling is about doing the minimal amount of general change and then adding to that lots of permission to do local experiments and local pilots, and keeping the terms of reference as open and wide as possible.
You didn’t really have a risk, because you’d already done the principles work, so as long as you stay within that framework you have as much freedom as you want.
So, state all the local experiments and small local initiatives, but within a defined architecture of principles and purpose as glue. That all becomes the new boundaries of an organization. What we’re finding now in this organization that top-down is starting to meet bottom-up. We’re really getting some synergies going and starting to cross-pollinate some of the initiatives. ‘Test and learn’ is a common phrase, and people are showcasing things they’ve done on their own. The speed is really picking up. It’s an org of about 2,000 people, and it’s big enough that you can really feel the energy now.
Reframe competitive advantage
In a heavily networked environment such as our technocracy, you have to consider your whole ecosystem. Who can you align with? If you think like a closed system, you miss out on emergence and visibility.
It might come across as slightly naive that collaboration is the way to go forward — being stronger as part of the system rather than as a small subsystem. At UNICEF, our challenge was almost the ‘ego’ of the organization. They were the biggest player on the block, and they still need a big brand, particularly because of the need to raise donations. I did a really interesting piece of work with UNICEF while I was in Rwanda. And whatever you might think about the politics of Rwanda, in terms of Africa, it’s probably the country that has its act together most in terms of a really focused government. In most African countries UNICEF goes in as the biggest player and tells the African country what its social policy should be in terms of child welfare and poverty, and what you end up with is a lot of wasted energy in many of those countries.
What was different in Rwanda was this: We went in to define a strategy for UNICEF, assuming we’d be the biggest player and we’d essentially wipe out the competition. But the Rwandan government called in all these independent stakeholders — the UN, Oxfam, Save the Children, NGOs, stakeholder communities, government departments — to a huge forum on social welfare and child policy in Rwanda. The government said, these are our outcomes and goals for what we want Rwanda child policy to look like. In this room over the next three days we want you to work out what your contribution will be to our vision.
So it turned this whole notion of the players in the room being competitors, to the players in the room being collaborators. Instead of driving and dictating the whole of social policy, UNICEF ended up stating where it could contribute best, and who it could work with on different parts of the policy, and where other people and organizations could take a lead. What we ended up with was a really integrated, efficient use of resources in terms of contributing to the outcome of child social policy in Rwanda.
What it shifted was this egocentric view of UNICEF — and you could substitute almost any commercial organization here, really — that just wants to drive and ultimately ends up wasting resources. Whereas if you focus much more on the systemic outcome and the potential contributions of a whole system of contributors to that outcome, you get very different results. When you do start working like that, you have a real problem of attribution. How can you attribute very clearly UNICEF’s contribution to eradicating poverty in Rwanda? UNICEF wanted to use that in its fundraising. But when you work in that much more collaborative contributory way, you can’t say that it was solely UNICEF that had the solution. You had to say it was UNICEF and two or three other organizations that had previously been positioned as competitors. It was causing a radical rethink of how you play and interact in a system, in a much more contribution-focused way rather than being a dominate player.
At Nokia, the big question for us was, “Who is our competitor?” Of course everyone said the other mobile phone companies, like Samsung and Motorola. But it wasn’t. Our biggest competitor was Microsoft. And that played out in the last few years. Microsoft has actually bought Nokia and completely transformed it. So it’s an old-fashioned mindset, this notion of competitors. You have to look at the whole ecosystem, and who’s playing in that system, and who can add value. Who can you align with rather than who’s your competitor?
The VUCA world is here.
The time is right to apply whole systems thinking to organizational strategy. It’s a global thing — organizations are realizing that this VUCA world is out there, it’s just not mapped. I just think the conditions are right for leaders to be receptive to this sort of thinking. Toward the latter part of my career, I’m really envious of people who are just starting off, because over the last 20 years, although I was working with these concepts, there wasn’t as much awareness or receptivity. It’s an exciting time.